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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






2. Exists at the point where the quantity supplied equals the quantity demanded






3. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






4. The marginal utility from consumption of more and more of that item falls over time






5. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






6. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






7. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






8. The most desirable alternative given up as the result of a decision






9. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






10. ATC = TC/Q = AFC + AVC






11. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






12. Ed > 1 - meaning consumers are price sensitive






13. The rational decision maker chooses an action if MB = MC






14. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






15. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






16. Ei = (%dQd good X)/(%d Income)






17. MUx / Px = MUy/Py or MUx/MUy = Px/Py






18. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






19. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






20. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






21. Entry of new firms shifts the cost curves for all firms upward






22. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






23. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






24. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






25. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






26. Exists if a producer can produce more of a good than all other producers






27. A good for which higher income increases demand






28. Models where firms agree to mutually improve their situation






29. Entry of new firms shifts the cost curves for all firms downward






30. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






31. Ei > 1






32. All firms maximize profit by producing where MR = MC






33. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






34. Ed = 1






35. A firm that has market power in the factor market (a wage-setter)






36. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






37. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






38. AVC = TVC/Q






39. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






40. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






41. The lost net benefit to society caused by a movement away from the competitive market equilibrium






42. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






43. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






44. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






45. Ed = 8 - infinite change in demand to price change






46. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






47. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






48. Ed = (%dQd)/(%dP). Ignore negative sign






49. Occurs when LRAC is constant over a variety of plant sizes






50. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly